Mountain View Voice

News - December 14, 2012

Council compromises on housing fees

Millions more to be generated for affordable housing

by Daniel DeBolt

Facing an unprecedented demand for more affordable housing in Mountain View, City Council members voted Tuesday to increase funds for affordable housing through fee hikes on commercial building and rental housing developers.

After much disagreement, council members voted 4-3 in favor of the new fees, designed to increase the number of subsidized homes for lower-income residents in Mountain View. Mayor Mike Kasperzak and council members Ronit Bryant and Jac Siegel sought even higher fees and opposed the motion.

The new fees are expected to generate millions every year for affordable housing projects such as the 50 apartments under construction downtown at Evelyn Avenue and Franklin Street. It is costing the city over $12 million and provides homes to families making less than 60 percent of the area's median income.

Though he opposes subsidized housing, council member Tom Means succeeded in passing a motion intended, he said, to "minimize the pain" on developers. Council member Laura Macias was the swing vote, supporting the fees when an implementation date was set for February 9, 2013, five months earlier than Means proposed.

The move raises the amount paid by developers of office and high-tech buildings from $7.43 to $10 per square-foot, less than the $15 per square-foot proposed by city staff and supported by council members in a recent study session. The average in nearby cities for such a fee is $11.87. Fees for retail, entertainment uses and hotel buildings were left at $2.47 per square-foot.

The need for affordable housing has increased dramatically in the last 10 years, said city staff members. In 2001, only 33 percent of the city's "low-income households working in the commercial sector" households earned less than 80 percent of the region's median income. A decade later, 84 percent make less than 80 percent of the area's median income.

"Minimum-wage workers would need to work 164 hours per week to afford to rent a two-bedroom apartment" in Mountain View, said resident Bruce England. "Wages have stagnated but rents haven't."

Council member Bryant supported higher fees on commercial developers, and expressed disappointment that other members did not, such as Margaret Abe-Koga, who had supported $15-per-square-foot fee but voted for $10. That will mean millions less in housing funds as companies like Google are set to expand rapidly in coming years.

"With the new general plan allowing quite a bit of intensification of office, I do think that increases demand for housing," Bryant said. To say we're afraid people won't make more offices here — that makes absolutely no sense to me. There's always been development in Mountain View because this is a very desirable place to be. It's not clear why we are lowering fees on office when office is a very important generator of the need for affordable housing."

Little was said by anyone to oppose a higher fee on office development.

Opposition was much more apparent to fees on rental-housing development, which the council ended up also setting at $10 per square-foot, less than half of the $21.94 recommended by city staff. "Rental housing is the most affordable housing product that exists in our community," said resident and real estate veteran Jim Pollart. "Additional apartments doesn't exacerbate our housing crisis, it improves it."

After a court decision struck down a previous fee on rental-housing developers, the city commissioned a court-required "Nexus Study" to prove the need for such a fee. The study determined that a fee as high as 11 percent of the project's value could be supported. The city previously had a fee of 10 percent, while Palo Alto had charged 25 percent. The new fee is equivalent to less than 3 percent of the project's value.

The proposed fee of $21.94 per square-foot would have been equal to 4.6 percent, high enough to encourage developers to take the option of including affordable units in a project rather than pay a fee.

"I want units — the money is too difficult to handle," said council member Siegel, expressing a similar sentiment to other council members who say the city hasn't been able to build enough affordable housing projects. "I don't want projects, I want the (affordable) housing sprinkled throughout the city."

Groups representing the rental housing industry opposed new fees on rental-housing development, some noting that rental housing could not be blamed for the "affordability gap" because no apartments were built over the last decade. There are now over 1,000 apartment units in the planning pipeline.

Pollart said the cost of the fees would be passed onto landowners and wouldn't hurt developers.

"If you pass this ordinance it's not the developers that are going to be incurring this cost; it's the landowners," Pollart said. "What all developers do is the same: net out all project costs" before making an offer on the land. "Dollar for dollar, land value decreases."

Joan McDonald of Advocates for Affordable Housing said the cost of the fees would not be passed onto renters because the market drives rents, not development costs. "Developers are not philanthropists and will charge the highest price the market will bear," she said.

Mayor Kasperzak supported the higher fee on rental housing, but lamented not being able to get enough votes.

"I suffer from no delusions of grandeur but I wish I had some patronage to get a vote here or two," he said, referring to scenes from the movie "Lincoln."

Macias gave her support when the date for both fees was set for February 9, 2013, instead of July 2013. The delay would have spared six apartment projects in the planning pipeline — 930 units — potentially worth $15.3 million in affordable housing fees, Lauzze noted in her report.

It was the last meeting for both Macias and Means, who each served eight years on the council.